Large companies and other businesses have extended their cost-cutting efforts to the area of procurement of non-production supplies. Non-production supplies, which are also known as non-production products, indirect supplies and maintenance, repair and operations (“MRO”) products, encompass all the supplies and materials that a business uses, but which do not wind up in the business end products. Non-production products range from office supplies to facility maintenance supplies.
Indirect or MRO procurement for large companies and other businesses is a cumbersome process characterized by large amounts of paperwork, lengthy cycle times, returns, frequent errors and costly “maverick” buying outside of established procurement rules and supplier contracts. To manage this process, business requisitioners are often required to spend substantial amounts of time on inefficient, tactical tasks instead of focusing on strategic sourcing activities that reduce costs. The result is an unbalanced business equation, in which businesses incur high per-transaction expenses for indirect supplies that, in and of themselves, have a relatively low-dollar value.
With the recent expansion of the Internet, businesses are now looking to Internet-based procurement as a means to save time and money in the indirect purchasing process. Businesses want to streamline the purchasing process by enabling their requisitioners to easily search, find, select, compare and order contracted items from approved suppliers. Businesses also want to enable their requisitioners to easily search, find, select, compare and order other supplies (which are not contracted items from approved suppliers), as necessary and in accordance with standardized procedures. Businesses expect that this will eliminate paperwork, encourage contract and procurement procedure compliance, improve order accuracy, and relieve their requisitioners of certain day-today paper management burdens and thus recognize substantial cost savings. Additionally, for Internet-based procurement systems to meet the expectations of business and to provide the full potential cost savings to businesses, Internet-based procurement solutions need to provide data on actual spending activity, which the businesses can use to leverage their true buying power during negotiations with suppliers.
Internet-based procurement systems require accurate, up-to-date and easily searchable product information or content from the suppliers. Good content, rather than simply a large volume of content, is one of the keys to any procurement solution. However, many suppliers do not have product data available in electronic form or, if they do, supplier electronic product data is often incomplete or indecipherable and therefore unsearchable by buyers. Further, there are few convenient and efficient methods for keeping supplier electronic product data information up-to-date on a daily basis.
To meet these business demands, a small and growing number of MRO suppliers offer their own electronic catalogs at their web sites (i.e., electronic supply or sell-side catalogs). These suppliers typically manage the catalog content themselves or use an intermediary. While this is a promising new selling channel for businesses, sell-side catalogs alone usually do not meet the needs of large corporate buyers. First, buyers with hundreds or even thousands of suppliers do not have the time or resources to go to each supplier's web site. The fact that each web site has its own look and feel and ordering process complicates the procurement process and makes direct comparison between suppliers more difficult. Instead, these buyers need one secure, central location where they can access product information provided by all of their contracted suppliers using a single search and ordering process. Secondly, most suppliers with Internet based electronic catalogs do not have the necessary mechanisms in place to display each particular buying organization's contracted items with negotiated prices. Third, such systems do not account for, are not integrated with, or are not compatible with the existing procurement systems of buying organizations. Finally, purchases from such electronic sell-side catalogs are difficult to track and therefore do not provide buying organizations with the spending data needed to help the businesses make strategic purchasing decisions.
To improve control over their non-production spending, some businesses are building their own electronic catalogs (i.e., electronic buyer or buy-side catalogs). These catalogs contain data on all the products approved by the business through negotiated contracts. The software runs locally on the business's information technology (IT) infrastructure (i.e., usually its Intranet) and can be accessed by requisitioners using standard Internet browsers on their desktop computers. While electronic buy-side catalogs can streamline the requisitioning and ordering processes, can provide corporate buyers greater control over spending and can improve the purchasing process, these applications depend on the ability of the suppliers to provide data to the buyers in usable formats and update the information on a regular basis reflecting price and product changes. This is a major challenge for large buying organizations, which often have a large number of suppliers ranging from small operations with paper catalogs to electronic commerce-savvy major distributors. Buyers are often left on their own to manage the content input or ramp process, to decode all of the various catalog formats that are provided by suppliers, and to solve the data quality issues that undoubtedly arise. In addition, the “build your own” option can be prohibitively expensive for buyers due to the sizable investment in software, hardware and people required to create the catalogs, host them, and keep all the catalog information up-to-date. Such buyer-side systems can also take significant periods of time and buyer personnel to implement. It is also difficult to integrate commercial procurement systems with such buyer side systems.
Additionally, several intermediary systems have been proposed and developed. For instance, static product content providers provide the product content from several suppliers to a buyer's intranet or internet management system. Such systems work best for buying organizations with the ability to manage content, but lack complete product information update processes. Additionally, buyers and suppliers do not favor such systems because these systems reduce direct contact between buyers and suppliers. Vertical aggregation systems are also known. Such systems enable a single third party purchasing organization to purchase products from a plurality of suppliers through a vertical network. Such systems work best for spot buys or sourcing for specific products in select vertical markets. However, such systems have limited product lines and require use of multiple supplier interfaces.
Therefore, while various Internet-based intermediary catalog web sites and systems, sell-side web sites and systems, and buy-side web sites and systems have been proposed, developed and implemented, such known systems do not provide an all encompassing system which fully integrates the systems, needs and requirements of suppliers and buyers. More specifically, such known systems generally have one or more of the following content related problems: (1) they provide only static content; (2) they either do not provide transactive content or provide transactive catalog content which requires significant resources and capabilities to create and maintain; (3) they do not integrate supplies and supplier content into existing purchaser procurement programs; (4) they provide content in different or incompatible formats; (5) they do not provide product information which is standardized or classified; (6) they provide complex and costly procedures for maintaining and managing content; (7) they do not integrate content providers; or (8) they require a large number of commodity managers to convert and update catalogs from suppliers. Such known systems also have one or more of the following non-content related problems: (1) they do not provide suitable scalability; (2) they provide catalogs and order management limits with few suppliers; (3) they only support national or local contract ordering for known products, known suppliers, known prices, high volume orders or repetitive orders; (4) they require buyer customization; (5) they do not support non-contract ordering for planned or emergency spot buys or strategic buying for known or new products; (6) they require product and supplier differentiation (such that a supplier cannot also use the system to purchase products); (7) they provide only buyer managed catalogs; (8) they provide only supplier managed catalogs; (9) they permit only one buyer-manager (which works best for smaller organizations with a limited number of suppliers); (10) they permit only one supplier-manager (which works best for sophisticated suppliers with highly e-commerce enabled web sites); (11) they are inefficient because they require buyers to use multiple supplier sites, each site having different interfaces and search methods; (12) they provide supplier sites which do not integrate with buyer purchasing systems; (13) they reduce direct contact between suppliers and buyers; or (14) they work best for spot or one time purchases. Additionally, existing systems do not simultaneously satisfy the needs and requirements of large, medium and small sized suppliers and large, medium and small sized buyers. Accordingly, there is a need for a single integrated system which solves all of these problems for such suppliers and buyers.